You place an order for 330 units of inventory at a unit price of $200. The suppl

Question

You place an order for 330 units of inventory at a unit price of $200. The supplier offers terms of 1/12, net 60.

How long do you have to pay before the account is overdue?

If you take the full period, how much should you remit?

What is the discount being offered?

How quickly must you pay to get the discount?

If you do take the discount, how much should you remit?

If you don’t take the discount, how much interest are you paying implicitly?

How many days’ credit are you receiving?

You place an order for 330 units of inventory at a unit price of $200. The supplier offers terms of 1/12, net 60.

Explanation / Answer

a-1 1/12 net 60 means, 1% discount if the amount paid within 12 days, Full amount due within 60 days. a-2 Remittance within 60 days = 330 x 200 = 66,000 b-1 Discount offered is 1% if paid within 12 days b-2 To get the discount the amount should be paid within 12 days b-3 If the discount is taken the amount to be remitted would be 66,000 x .99 = 65,340 c-1 Interest to pay = 1% x 360 /( 60-12 ) = 7.50% c-2 Credit received = 60 - 12 = 48 days

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